News story (by Julius Bosire) - MPs’ pensions raise eyebrows

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Story by JULIUS BOSIRE
Publication Date: 3/14/2008

Questions were Thursday raised on the rationale of the taxpayer contributing more to the retirement benefits of MPs than the members themselves.

A law that came into force in 2003 requires that MPs contribute 12.6 per cent of their salary to the pension scheme, while the taxpayer contributes 25.4 per cent to the same kitty for each MP.

Many employees’ pension schemes are based on equal contributions by the worker and the employer, why MPs should be treated differently is cause for concern.

Besides, it emerged that plans to pay retired MPs pensions amounting to billions of shillings could be complicated by an earlier Sh1.5 million winding-up allowance that each received.

The Treasury was grappling with the figures as it was not clear what the money already paid to the MPs of the Ninth Parliament was for.

It is estimated that Sh12.7 billion would be paid by the Treasury to “retired” MPs monthly in pension, above a lumpsum payment that amounts to an even higher figure.

Large sums

Eyebrows are being raised as to why MPs awarded themselves large sums of money in an economy that was struggling.

The Treasury has already received 28 applications from former MPs for retirement benefits from the scheme established in 2002, but which came into force this year.

The scheme is expected to draw an initial lumpsum payment of Sh140 million for those who qualify, numbering 146.

The Treasury, however, indicated that it expected more than half of the number of the “retired” MPs to enter their claims, meaning they would draw billions of shillings from the Consolidated Fund this year.

The reason why the Treasury does not anticipate all former MPs to apply for their pension is that some may attempt to recapture their seats in the future.

Controversy surrounds the earnings that MPs took home before the end of the Ninth Parliament, when they awarded themselves Sh1.5 million each, claiming that it was part of the Cockar report package, which improved their terms of service.

Although there was no such a provision for MPs to be awarded Sh300,000 for every year served, the legislators argued out their case and got the money at the end of the Ninth Parliament. The question now is whether the Treasury will pay the MPs the money and consider that the initial pay as just a “handshake”.

By sources at the Parliamentary Service Commission Thursday indicated that it was upon the Treasury to decide on what the MPs should be paid. The Treasury has an option of deducting what the MPs were paid from their lumpsum or be paid as loans.

A notice by the Finance ministry’s department of pensions to all former MPs to file claims for payments of gratuity, pensions and other benefits reads: “The Pensions Department will process benefits for MPs who were not re-elected to the 10th Parliament.”

MPs have a contributory scheme into which they pay 12.6 per cent of their earnings, with the Government contributing an additional 25.4 per cent of the MPs’ salaries.

Each MP’s pensionable emoluments are calculated from the total salary, allowances for responsibility, constituency and House.

The annual pensionable emolument of an ordinary MP stands at Sh3.8 million while that of ministers and assistant ministers total Sh4.2 million and Sh3.9 million respectively.

Twenty ministers and 25 assistant ministers were felled in the last General Election.

From this group alone five ministers were first time MPs, implying that the Treasury would pay them a total of Sh30 million pension refund.

Fifteen of the assistant ministers who failed to make it back to Parliament were first time MPs and will take home a total figure of Sh75 million.

The ministers and assistant ministers who lost their seats but had served more than one term in Parliament will receive Sh200,000 over and above those who served a single term.

A minister who served more than two terms is to take a lumpsum pension payment of Sh1.5 million apart from monthly payment of Sh95,000 for the rest of his life.

For an ordinary MP who served two terms, Sh1.4 million would be paid as lump- sum and a monthly pay of Sh90,000 from the Pensions Department.